Are gas prices Ethereum’s inconvenient truth?

Passing your local casino, you fancy your luck on roulette and head over to the table, watch a few spins and feel the time is now right to bet.

You place $20 down on black, cross your fingers and wait for the croupier to spin away. But then, “that’ll be $5 to place the bet, please”, states the dealer, much to your surprise. You fancy your luck so you take the hit, but the punter next to you hears this and turns sharply to the door.

Paying $5 for the pleasure of placing a $20 stake doesn’t quite add up, right? Unfortunately, this is the problem the Ethereum blockchain is struggling to overcome at this very moment.

The parallels between Ethereum and land-based casinos may not be exact, but it’s reasonable to say that the crypto gambling experience should resemble the simplicity of the former if it’s to drive mass adoption in a meaningful way.

A necessary evil

Nobody wants to spend more than they need to, but sometimes a bit of security money is what’s needed to make everyone’s life that bit simpler, and more secure for it. That’s exactly what gas does for Ethereum.

Gas, in a nutshell, is the fee paid to successfully transact on the Ethereum blockchain. Whatever that transaction is – sending a payment, executing a smart contract, placing a bet –  the user or the host will have to pay a chosen amount of gwei (a denomination of ETH). This compensates for the computing power that miners are committing to ensure efficient resource allocation and the safety of the decentralised ecosystem.

When traffic on the network is high, gas fees rise accordingly, and the reverse works too. The implications for this for the Ethereum gambling sector are clear. The busier the network, the more costly it is to place a bet at an Ethereum-powered casino.

And the last few months have seen just that problem arise. The success of defi has made the network clogged and expensive. It’s become a victim of its own success. But Ethereum is bigger than defi and those using it for other means are not in the slightest happy.

Just the way it is?

Ethereum was the platform that took crypto gambling from 8-bit to HD. No longer tied to the limited bitcoin blockchain, gambling now returned fairness to players through smart contracts and gambling dapps came to the fore that the everyday player could understand without a BSc in Computer Science.

Nowadays, premium ETH gambling dapps, such as FunFair Technologies’ CasinoFair, have conquered the early uncertainty of blockchain tech and adoption to host solid playing bases that are slowly but surely edging into the mainstream psyche. Other less advanced, single-game focused dapps, such as Dice2.win and Fairspin, are also seeing their own impressive trajectories.

But miners don’t care for your product offering. Rising gas unequivocally affects the biggest defi products, massive revenue DEX’s and the great and good of crypto casinos as well.

Possible solutions

So what are Ethereum gambling projects doing about the impact of gas prices on player acquisition and retention?

Well, some simply didn’t see it coming. Edgeless was one of the first big players on the ETH casino scene, but they’ve come tumbling from a seven-figure market cap to effectively no daily active users, despite what might look like a quality platform.

Although its fall isn’t exclusive to gas prices, it’s fair to say that a casino that failed to offer players an alternative to gas prices that equated to potentially more than half their stake would have serious problems.

Others had more foresight. From its white paper, FunFair committed to side-chain technology that would allow for greater speed and efficiency when it came to gambling transactions. The benefits of this have been clear for its partner casinos, but it’s the current situation where it could reap the most benefit.

Stefan Kovach, the group’s CEO, reiterated that, “many competitors in the Ethereum gambling space have not optimised side chains correctly, at the expense of speed and cost.”

He went on to talk about the detrimental impact that has on players, who now bear the brunt of extortionate gas prices, and also provided details on their own project’s workaround, “our Fate Channels were designed to run optimally fast with efficient gas costs.”

In fact, the company, and its network of players, benefitted from their foresight and ‘Death to Gas’ project. This saw the casino making the generous, unprecedented move of covering gas fees for players in the back end.

Obviously, this affects FunFair’s bottom line, but in terms of what Kovach calls their “high-value player strategy”, players can now enjoy a “gas free, unique and exciting blockchain gaming” experience at CasinoFair and other partner casinos.

Few have executed this layer-2 solution to the level that FunFair has, and it looks like the majority of the market is now paying the price or instead, putting that cost unreasonably onto the player.

Is ETH 2.0 the answer?

The network-wide ETH 2.0 upgrade could be the answer. Greater scalability will undoubtedly lead to lower gas costs and faster transaction speeds. But we don’t really know when this is coming. So in-house solutions appear to be the best mid-term fix.

Kovach concluded that: “We see the current gas issue as a bump in the road, on the way to the long-term success of the Ethereum network”. He notes that solutions like Tether’s shift to OMG/Level 2 are an example of what can be done, but blockchain is moving fast, and decentralised gaming does not just equal Ethereum.

Other blockchain’s have pounced while Ethereum has been slow to progress. When it comes to casino, we’ve seen TRON and the likes of WINk become a prime competitor to ETH’s gambling crown. Fast and efficient, TRX gambling is attracting players at a rate of knots, and though security may not rival Ethereum’s standards, do all players know, or even care, about this?

Faith in Ethereum

It’s important to note that Ethereum gambling has not come to a standstill. As we’ve seen, FunFair is syphoning every bit of expertise from its own team to fight against traffic issues. Likewise, prediction market platform Augur, one of Ethereum’s flagship projects, recently launched its own v2.0 despite the seemingly poor timing.

And Ethereum users are loving it. Yes, there have been gripes over the cost of opening accounts and staking, but what Ethereum has over many other blockchains is faith. It was one of the first truly decentralised blockchains, and it has a vision that stretches beyond our lifetimes.

Augur is a prime use case for a decentralised future, and Ethereum’s disciples will struggle against rising costs to use progressive products like it.

For those gambling projects with a rapidly shortening runway, gas prices may be crippling. But solutions are coming, and as we’ve seen from FunFair, workarounds are possible.

At this present time, gas is an inconvenient truth, but one which projects in defi, gambling, or any other sector, must respect and work with creatively. It’s there for a reason, and a sound, long term view is needed to put the end user, punter or trader first in the name of the greater good, mass adoption of a decentralised world.

You can enjoy safe, and enjoyable gameplay at Bitcasino, 1xBit or FortuneJack.

Written by Justin

Our Jez may not have built up the crypto fortune of his namesake and TRON founder Justin Sun. But what Sun may have in Lambos, CryptoGamblingNews’ Justin has in blockchain casino smarts and wordsmithing. A keen follower of random sports, we're waiting for his niche knowledge to pay us back on several terrible betting tips.

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